What Is Corporate Governance?

Corporate governance refers to how a corporation ensures it makes ethical decisions that
reflect the needs of all parties involved, including employees, customers and shareholders.
Today’s corporations are often transparent about their internal governance structure,
posting it online for review by shareholders, customers and other interested parties.
Reasons for Corporate Governance Failures
No governance system, no matter how well designed, will fully prevent greedy, dishonest
people from putting their personal interests ahead of the interests of the companies they
manage. But many steps can be taken to improve corporate governance and thereby reduce
opportunities for accounting fraud

What Are Internal Controls?

Internal controls are the practical aspects of corporate governance. They are the policies
and procedures that a firm uses to ensure compliance with its own moral code. The goals of
internal corporate governance controls typically include:

 Safeguarding assets. Internal controls are put in place to help prevent asset loss due
to mistakes or fraud. 

 Minimizing errors. People inevitably make mistakes. Internal controls ensure that
financial information is carefully reviewed to reduce errors. 

 Promoting efficiency. Internal controls can take time, which has the potential to
lower efficiency. Internal controls can also prevent mistakes, though, which improves
efficiency in the long run.

 Minimizing risk. Internal control procedures may include regular risk assessments
to find areas where inaccuracies are occurring and improve those areas. 

Auditing and Internal Controls

Audits look at a company’s controls and corporate governance to ensure everything is

working as it’s supposed to. If an audit uncovers issues, the auditors make
recommendations for resolving those issues. External audits are conducted by a neutral
third party. Internal audits are done by board members or other stakeholders in an
organization to uncover issues before an external audit.

Internal audits can take place on any schedule that ensures procedures are being followed.
Some departments might have weekly audits, while others might have quarterly or semi-
annual audits.
Why Are Internal Controls Important to Corporate Governance?

Internal control activities ensure that companies adhere to corporate governance guidelines.
Corporate governance sets the standards and recommends procedures; internal controls
ensure those procedures are being followed. Internal controls also ensure there is an audit
trail that can be retraced during internal and external audits.

What is an Auditor?
An auditor is a person authorized to review and verify the accuracy of financial records and
ensure that companies comply with tax laws. They protect businesses from fraud, point out
discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping
organizations to spot ways to boost operational efficiency. Auditors work in various
capacities within different industries.

Auditor’s Role in Corporate Governance

1. Corporate governance involves decision making, accountability, and monitoring.

2. Decisions require relevant and reliable information.

3, Accountability involves measuring, reporting, and transparency.

4. Monitoring involves systems and feedback.

Auditor’s primary role is to check whether the financial information given to investors is
reliable.

Types of Auditors

 Internal auditors (IA) are hired by organizations to provide in-house, independent

and objective evaluations of financial and operational business activities, including
corporate governance. They report their findings, including tips on how to better run
the business, back to senior management.
 External auditors usually work in conjunction with government agencies. They are
tasked with providing an objective, public opinion concerning the organization's
financial statements and whether they fairly and accurately represent the
organization's financial position.
 Government auditors maintain and examine records of government agencies and of
private businesses or individuals performing activities subject to government
regulations or taxation. Auditors employed through the government ensure revenues
are received and spent according to laws and regulations. They detect fraud, analyze
agency accounting controls, and evaluate risk management.
 Forensic auditors specialize in crime and are used by law enforcement organizations.

Auditors are accountants whose main duty is verifying a company's records to make sure that
all information matches what was provided. An auditor goes through bookkeeper records,
creditor records and tax records to find any errors and determine how to correct them.
 External Auditor Duties

An external auditor is either self-employed or works for a firm hired by the company she's
auditing. This type of auditor comes in as an independent third party to check the financial
records. The purpose of her work is to find errors, cut costs and improve general accounting.

Internal Auditor Duties

Internal auditors are employees of the company that they are auditing. Large companies often
have at least one auditor on their accounting staff. The duties of these internal auditors don't
differ much from those of external auditors, but dealing with a single company's books allows
them to become very efficient at checking its records and figures.

Responsibilities of an auditor the statutory responsibilities of the auditor fundamentally

require the following:

1. Duty to make certain inquiries

2. Duty to make a report to the company on the accounts examined
3. Duty to make a proclamation in terms of the provisions set.
4. Detection and Prevention of Fraud
5. Duty to report fraud
6. Duty as to substantial precision